The Sporting Goods Manufacturers Association released their annual State of the Industry report at this weeks Super Show in Orlando, citing strength in the fashion end of the athletic footwear and apparel business and a stronger economy for the estimated 6.8% increase in wholesale deliveries reported by industry manufacturers for 2005 versus the prior year, prompting them to raise thier forecast for 2006. The increase was reportedly the largest since 1997 when wholesale sales grew 5.2%, and was nearly double the 3.5% increase that SGMA projected for the year. The results, which are based on a survey of SGMA members each year, shows a clear acceleration from the 4.2% gain in 2004 and makes the 0.5% decline in 2003 and the anemic gains in the early part of the decade look like a distant memory.
The growth in the industry was also double the estimated 3.5% growth in U.S. GDP for the year, a reversal from last years outlook that saw the industry settling into its new mature industry status after the heady growth of the early nineties. That growth easily outpaced the economy at the time, but sluggish growth in late nineties fell short of GDP growth driven by the tech sector. Based on the success of recent IPOs, and the surge in higher ticket performance product sales driven by Under Armour, Asics, and Nike, the sporting goods industry may just start looking more like that tech sector again for the next few years.
The report pointed to positive results in four of the five largest categories in 2005, with Outdoor Equipment seen as the only decliner for the year. Wholesale shipments of Sports Apparel rose 9.0% to an estimated $26.1 billion in 2005 from $23.9 million in 2004. Athletic Footwear shipments were also up 9.0% to an estimated $10.9 billion, up from the $10.0 billion milestone set in 2004, roughly matching the high-single-digit increase estimate made by Sports Executive Weekly earlier in the year. Fitness Equipment experienced an increase of 6.0% to $4.2 billion, 80% of which represented equipment for home exercise. Golf Equipment sales rose 2.0% to $2.6 billion. Based on the SGMA report, Outdoor Equipment shipments apparently declined 7.0% to $1.6 billion for the year.
Tennis, which is comparatively a much smaller category, posted another strong year, growing nearly 10% to $244 million on top of the 6.0% growth in 2004. The Tennis Industry Association is suggesting that a 3% to 5% estimated increase in ball sales indicates higher participation numbers. TIA is also estimating that wholesale sales of super premium racquets, which sell for $150 or more, were up 50% for the year, while sales of racquets under $75 rose 15% in 2005.
The sporting goods industry saw a 14.2% increase in the five-year period from 2000 to 2005 and grew 79.3% since 1990. The five-year growth gain was driven by above-average growth in Soccer (+23.6%), Athletic Footwear (+21.7%), Sports Apparel (+16.1%), Archery (+15.6%), and Fitness Equipment (+14.4%), offset by a 55.7% drop in In-Line Skate wholesale sales, a 12.2% decline in Water Sports, an 8.0% decrease in Billiards/Bowling sales, and a 3.3% decline in Outdoor Equipment sales.
In sharp contrast to last years report that indicated a lack of innovation in the industry that may have led to growth stagnation, this years report may indicate better things to come for the industry as baby boomers age and spend more of their disposable income on new innovative products that make their required fitness regimen more productive, comfortable, and sustaining.
The SGMA report also touches on the declining participation numbers in most sports and outdoor activities, except for fitness and exercise, a real reflection of the aging of the population. Participation studies cited by SGMA show that Team Sports and Tennis have lost millions of casual players but have retained a strong core of frequent players.
SGMA said that that organized team sports in schools have shown growth, due primarily to the infusion of more female participants, but that participation growth rate has failed to keep pace with population growth. The report suggested that the demographic outlook does not favor a reversal of this trend either. One interesting note found SGMA pointing to the emphasis of elite players and competition in organized team sports that has led to the “freezing out” of children who might like to play sports just for fun.
SGMA is forecasting 7% wholesale sales growth for 2006 based on their survey of members, more than twice the 3.3% to 3.4% growth in U.S. GDP estimated by the Bush Administration.
Sports Executive Weekly will release a full report of 2005 retail sales results after the retail fiscal year closes. The report takes an in-depth look at footwear and apparel sales at the category level by channel.
| The State of the Industry 2006 | ||||||||
| Manufacturers Sales 1990 – 2006 (projected) | ||||||||
| (in $ millions) | 2000 | 2004 | 2005 | 05/04 | 5-year | Since 1990 (est.) | 2006 (proj.) | 06/05 |
| (est.) | (est.) | (est.) | (proj.) | |||||
| Exercise Equip. | $3,655 | $3,945 | $4,182 | 6.0% | 14.4% | 291% | $4,391 | 5.0% |
| Golf Equip. | $2,524 | $2,506 | $2,556 | 2.0% | 1.3% | 98.9% | $2,582 | 1.0% |
| Outdoor Equip. | $1,680 | $1,747 | $1,625 | -7.0% | -3.3% | 63.6% | $1,625 | 0.0% |
| Water Sports | $515 | $430 | $452 | 5.1% | -12.2% | 7.6% | $474 | 4.9% |
| Billiards/Bowling | $460 | $470 | $423 | -10.0% | -8.0% | 34.3% | $423 | 0.0% |
| Baseball/Softball | $440 | $489 | ||||||
